The Age of Robber Barons

0:00The Age of the Robber Barons When we consider the problems facing all of us in the world we live in, and when we grope and seek ardently to find solutions for these problems, many people find it difficult to believe that a free market offers the best possible alternative to what we have. The reason for this is that they have a fear of free market operations. And one of the fears that they have is the fear of unscrupulous men who get themselves in positions of economic supremacy, and because of that most people believe that should this occur they would be absolutely helpless before the power and the might of those men in positions of economic influence and power.

0:58In support of this fear that people have relating to the power and the bigness and the unscrupulousness Business of Men in Major Economic Positions. There is a period of time in our history that is referred to by a number of writers as the age of the robber barons. And this period of time and the persons who rose to prominence during that time are often cited as a reason to justify the fear that people have of a free market. So it would be an important thing for us to examine that era to see just what did happen and to see what the robber barons did, the so-called robber barons, what they did and what they are accused of. In studying the age of the robber barons, we can set it down chronologically as that period of time arising after the Civil War, probably about 1875, and continuing on up in general to about 1910. Actually, in some respects, the age of the robber barons continues today. There

2:29are still a few men who are giants in industry, commerce and finance, who loom large on the American horizon, and doubtless who will be listed in some future book as robber barons At the present time, very few people call them that, because they usually think of the age of the robber barons as already having passed. Nonetheless, these men would probably qualify at some future time, so we might keep them in mind. There is actually a literature in existence, perhaps several hundred titles, relating to the robber barons, the giant moguls, and the big men of apparent power and influence who certainly dominated that period of time from 1875 to 1910 in the development of this country. And, of course, what we should examine then is the criticism that has been leveled against these persons to see whether or not the criticism is warranted and whether or not these men in fact injured the development of America, and made conditions worse for people generally, or if in point of fact their

3:44contribution was beneficial and people gained as a result of what these men did. In studying the various books that have been produced and the scholarship that has examined the lives of the so-called robber barons, there are in the main three criticisms that Let me take these three criticisms and see whether or not they are warranted. The first of these is this, that every one of the robber barons became enormously wealthy. Now, I don't think there's any question of that. In fact, that's how you qualify as a robber baron.

4:32You would have to be wealthy in a very, very large way, and so the men that are held up to criticism here and attack and abuse in every case are very, very wealthy men. It actually appears as we go over the literature respecting these people and this period of time that becoming wealthy is almost a crime in itself. This seems to be the attitude of the writers, that commercialism per se is bad, that anyone who succeeds in a commercial venture is somehow reprehensible, and anyone who succeeds in an extraordinary way must be a villain of the first caliber. Why would this idea persist?

5:18Well, it appears to trace back to a very early concept that many people seem to have about about the workings of the market. It is lost in antiquity, but the idea apparently stems from a view of the world that suggests that the total amount of wealth in existence is static. There is just so much of everything. And therefore it would follow, if that were true, when all the wealth in the world is just a fixed amount, x, whatever it may be, that if a man enters into a business transaction with another man and profits as a result of that transaction, then it would follow, using this same base of reasoning, that the second man with whom the transaction occurred would have lost. And so there appears to be just is an innate type of villainy or immorality in business per se. Any kind of business is viewed as being something that, well, somehow it's a little dirty. It's just not the kind of thing that good people want to get into. They get into it unavoidably because they

6:36have to stay alive, but actually they would prefer not to be there. They would prefer to be in something that is at a higher moral level. And this is the way these thoughts run. And this of course appears in the literature against the robber barons. So it is made to appear that here we have a typical robber baron who has made a fantastic amount of money. Well, obviously then, according to the thinking, since he has made so much money, he must have

7:38People viewed wealth as consisting primarily of land. And when they did, well, you're dealing with something that is more or less static. They're not making very much land anymore. You have pretty much a fixed quantity of land. But that is not the only kind of wealth that exists. The land can be improved, and whatever is added to the land becomes additional wealth. And then the goods, the personality that human beings have learned and how to produce and create and manufacture. All of these things become wealth, and so the amount of wealth in the world is constantly increasing. Take for a moment and go back in your mind to say the time of Henry VIII in England. Henry VIII, one of the great tutors, was a very, very powerful man, virtually what could be called an absolute monarch, a total

9:05The Theory of Money and Credit He didn't have that as a rule. He caught most of the diseases that were available. He never had an adequate medical examination. He never rode in an automobile or saw a bicycle, much less an airplane, or even conceived that such things were possible. He never attended an opera or a decent concert. He attended concerts, but by our standards they were pretty shoddy Affairs. His clothing was not properly made. He never saw television or a moving picture show. This man was deprived by our standards, and yet he had the best of everything.

10:15Now, take a look at Henry VIII and then view our own period of time. Is there more wealth in the world today than there was at the time of Henry VIII? Obviously there is. Well, where Where did it come from? If the total amount of wealth is static, then there could be no more wealth now than there was at the time of Henry VIII. At the time of Henry VIII, most of the people of England were impoverished. Probably 90% of the people of England didn't have enough to eat. Today, most of the people of England have enough to eat. Where did that Additional Food, that additional wealth. Clearly what has happened is that when human beings apply their brains and their energies to the products of nature and put the pieces together, correctly, they produce wealth, and we all have more. Now this is a point that Adam Smith saw in his work, The Wealth of Nations, but it is a point that many people

11:16When a free exchange occurs in a free market, both sides to the exchange profit. Because, assuming a free market, the exchange will not occur unless each party to the exchange would rather have the exchange occur than not, because anyone who wants to can voluntarily withdraw at any point. So exchanges only occur when in the mind of the party to the exchange It is to his advantage to culminate the exchange. That's why they occur. So in point of fact, here we have these so-called robber barons becoming enormously wealthy, which they did, but they did so in process of making exchanges with other persons who gained at the same time they did. Now that's a hard thing for people to understand, but that's the truth.

12:11in any kind of exchange assuming a free market. And at the time we are speaking of, the market was far more free than it is today. At that time, the people who purchased the goods or the services offered by the robber barons became wealthier as a result of those exchanges just as the robber barons did. So although I will have to admit that every one of the Robert Barons, who has been accused of accumulating great wealth, I could stand here and say that accusation is justified. Nevertheless, I would say it's not a criminal accusation. It's a good thing. Our problem in this country is that we don't have enough wealthy people.

12:58Not that we have too many. And of course, the idea, and it is an absurdity if you look Look at it. The idea that a person can become rich by exploiting people who have nothing is clearly fallacious. How can you make profits off somebody who hasn't anything to begin with? Take a number of people and assume that they have nothing, and then you take something away from them. How can you take something away from them if they haven't got anything? Clearly that's not so, and yet that's the general feeling and that's the general tone of Most of the Literature aimed at criticizing the robber barons. It is said that they exploited the poor and got rich by taking something away from those who didn't have anything to have it taken away in the first place. And that's clearly ridiculous. But this is what you find in the literature. So that's the first accusation. The robber barons got wealthy.

13:55Let me admit it. The second accusation that is brought forward is that every one of the Robert Behrens fundamentally tried to become a monopolist. He sought to corner the market in his own favor and drive everybody else who was competing with him out of business. Well, in examining the behavior of the men who lived from 1875 to 1910 and are called Robert Behrens, I'm going to have to plead in favor of that accusation, too. I think I think every one of the robber barons was definitely engaged in trying to become as monopolistic as he could. I think that's true. As a matter of fact, I'll go beyond that. I think that virtually all businessmen would like very much to work so well at their business that they would make it very difficult for their competition and maybe secretly, way down deep inside, they'd like to drive their competition right to the wall and put them out of business.

14:59I'm perfectly willing to accept that concept. I think it's true that any good businessman has enough confidence in himself and he knows what he's doing well enough and can do it well enough so that he feels he's got a reason to attract customers and that the reason that he has for attracting customers is valid enough so that he wants to get most of the customers coming his way, if not all of them, because he feels he can do a better job. So let me We confess, then, on behalf of the robber barons, that this is what they were trying to do. The interesting thing is, is that it doesn't matter. Because if you have a free market, the competitive factors are so dominant that even though these men may very well have sought monopolies, not one of them ever got one. They tried, but they never made it. So, If you have a free market and you have big men engaged in very, very keen competition,

16:02and that's what we had during the so-called age of the robber barons, you don't have to worry about the people becoming monopolists, assuming that they're limited only to a free market operation, because here you had a case where admittedly the government did not intrude, at least it didn't begin to intrude particularly until around 1890. So you have 1875 to 1870, 1890 with very little government intervention, and during that time you have these men striving to become monopolists and doing their best to become monopolists, and there is no government intervention, and these men did not become monopolists, in spite of the fact that they tried. Now, of course, it is sometimes suggested by various writers that they did, in fact, become monopolists, but this is not true. I'll touch on one or two of them specifically in a moment, to show that the accusation against them as monopolists is invalid, although certainly it is not invalid if we are talking in terms of intention. Every one of these

17:01robber barons, I am sure, intended to become a monopolist. Now the third accusation that is levelled at these same men, this is not a constant accusation, although most of them have it laid at their door, and that is the accusation

17:48If the writers had had the same amount of wealth, be that as it may, it is clear that some of these so-called robber barons had a very large penchant for spending money on frivolous things. That is, they would give parties that were lavish and expensive, and they would sometimes have two yachts when one would have sufficed, and they would have

18:42have impeccable taste, but he steals my money in order to express it. Somehow I have a lot better feeling for the so-called robber barons who earned their own money and didn't steal it even though they may not have expressed themselves with the expenditures that they undertook as you and I might have. Nonetheless, I can't get excited about it, whereas I can The three points that are usually named are, 1. They attain great wealth, 2. They sought Monopoly, and 3. They had bad taste.

19:43Now to those accusations I am going to add a fourth. Now most of the literature in this area does not mention this as a negative factor, although of course the facts in the cases are recited. But here is the negative factor that I see that applies to these men. Not Not to all of them, but to a great many. And that is that when they tried to obtain monopolies in the free market, and found that they could not do so, that the market itself, so long as it is free, is competitive, and therefore they didn't have a chance of getting a monopoly, then we find one after another of these big men, these so-called robber barons, turning to the government to try to get laws passed that would place them in a privileged position so that they could take advantage of their competition. Now, when that happens, I give these men a bad mark because that is not the way a free market should work. A free market

20:46should be what the name implies, a market that is free of restraints. And that means that it will be a competitive market and that everybody in it is going to have to compete at the same level with everybody else. But as long as you have a government that wealthy men can go to in order to get special power handed to them, then you do have the chance of corrupting the market and ultimately creating a condition of privilege which a number of the men that we think of as robber barons in fact took advantage of. Now this does not mean to suggest that they all did because they did not. There are several outstanding cases where these big men refused absolutely to have anything to do with the government and operated strictly in the market and made their fortunes without any political help or connivance. And I applaud them unceasingly, even though they may have tried to get a monopoly that never came close. But the ones that came closest were the ones that went to the government

21:49for Help, and of course that I view as reprehensible whether they became wealthy or not as a result. Let me take a few of the names now of the so-called robber barons and discuss just one or two cases. We have to begin the list with John D. Rockefeller. He is the number one Bad Boy in American Economics, his name has become a household word of anathema in a sense, so we must take a look at him and Standard Oil. And then of course there was Carnegie and Vanderbilt and Morgan and Jay Gould and a fellow named Jim Hill and Henry Ford is often brought in. There are just a number of men who became prominent, wealthy, important Focal points of wealth and power in the economy and who have been tabulated, you see, as these robber barons, so called.

22:49Well, let's take Rockefeller as a case in point. Rockefeller's worst critics admit at the outset that here is a man who is scrupulously honest. That's an interesting point. They We take pains to point out that John D. Rockefeller never misplaced a penny. His books were immaculate. He accounted for everything that he ever touched. No one has ever faulted him on any charge of dishonesty. There is no question that Rockefeller became wealthy. He became one of the all-time of the World, and obviously he did it with the creation of standard oil. Now first it's important to understand that standard oil as it began was not anywhere nearly the size that it is today. We're talking about 1875 when the development of oil in the country was primarily going into paraffin and kerosene products. Gasoline was only just being developed and the internal combustion engine was just getting started. So the oil business as such was a tiny business compared to what it is today. So of course naturally we tend to have

24:06better hindsight than foresight and so we think of standard oil as this giant firm. At the time Rockefeller created it, it was just a little operation, that's all it was. But Rockefeller sought not to bring in new oil wells or develop the flow of oil in this respect. What he sought was to improve on the refining of oil. And he thought that he could do it well enough so that only his company would be the only company that would do any oil refining. That is what he wanted standard oil to accomplish. So he set out to do it. And of course later on, as you know, Standard Oil was cited by the anti-trust people by the Justice Department and a trial ensued and Standard Oil was found guilty of monopoly practice and was at this point fined and broken up into a number of subsidiary companies.

25:05Incidentally, it was broken up exactly the way Mr. Rockefeller had planned it. He wanted it broken up because it had become unwieldy and he made the recommendations to the court that were accepted by the court, so that actually the court assisted Mr. Rockefeller in making standard oil more efficient than it had been to begin with, which was pretty cute. Anyway, when Rockefeller got into the oil business and decided that he wanted a monopoly in this area, he began competing with every other refinery on this basis. He cut prices. He reduced his prices and he improved his quality, and of course the result was that he really gave his competition something to work against. Now, the accusation was brought out in the hearing, and it's certainly true, that by this type of practice, by cutting his prices and becoming increasingly efficient, Rockefeller forced a number of companies into Bankruptcy. If they did not have good management, he did have good management, and he was able to bankrupt them.

26:17This is a very interesting sidelight here. After he had bankrupted a company by competing with them at a level that they couldn't meet, his normal procedure was to go over and buy up the assets so that the people that he literally drove to the wall were never ruined because

27:06in the antitrust proceedings that in the face of Rockefeller competition when it was as tough as it could be a number of companies were gaining ground on Rockefeller and he was not only not defeating them he was not able to defeat them and they prevented him from having a monopoly at all and they did it in the free market not with any government help so there is the story of Rockefeller I wish there were time to get into some of the other stories but if you'll examine To examine this area with an open mind, I think you'll see that the men called robber barons did a lot more good than they did harm. Wealth is not reprehensible, per se. I would certainly recommend that wealthy men don't run to the government for things. But if they operate in the free market, we haven't anything to fear from men, no matter how competitive they are in their various economic pursuits. Thank you.